Factors that affect Bangladesh’s Export positively

Exchange rate:
The exchange rate is one of the most important policy variables, which determines the trade
flows, capital flows & FDI, inflation, international reserve and remittance of an economy.

The real devaluations/depreciations of exchange rate have been positively associated with
improvement of balance of trade.
Thus, depreciation/devaluation of currency as a whole seems to be beneficial for
Bangladeshi exports.
However, economists discourage continual depreciation as because highly volatile exchange rate
makes macroeconomic variables such as inflation, interest rate, narrow & broad money supply
etc, unstable.
Moreover, complete credibility of trade partners on the exchange rate is important for stable
trade flows.
As Bangladesh currently operates its exchange rate policy under free floating exchange rate
system, a stronger official market is required so that the speculators cannot bring a total collapse
in the currency market.

Partner country’s total import demand

Bangladesh suffers from a chronic deficit in her trade balance as the export of Bangladesh which
is one of the most significant factors responsible for unfavorable trade balance of the country.
The aim of this presentation is to intend some initiatives for an attempt to ultimately reshaping
the trade balance of Bangladesh with her foreign trade partners.

This presentation examines that the existence of the gravity theory for the exports of Bangladesh
with its eight
major trading partner countries- India, China, Singapore, Japan, Hong Kong, South Korea, USA
and Malaysia.

We found that the gravity theory is consistent with the exports of Bangladesh. That is, the
geographical distance of Bangladesh with its partner countries has significant impacts on its
exports. But in near future this may change because of different factors such as profitability, easy
trade procedures, product delivery time etc. that influence the export is decision more than does
the geographical distance.
Openness to Bangladesh economy:
A wide body of evidence suggests that increased openness to trade and greater export
competitiveness contribute to higher rates of economic growth. Export competitiveness
depends, in part, on Customs and other administrative export trade practices, as well as
on the efficiency of port operations and the transportation linkages between the ports and
the main centers of export production.

Garments are Bangladesh’s primary export, and the export competitiveness of

Bangladesh’s garment sector is currently hindered by time consuming and costly Customs
and administrative procedures. Duplication of cargo verification, at both the import and
export phases, gravely hampers Bangladesh’s competitiveness..

Factors that affect Bangladesh’s Export negatively

Transportation cost:
South Asia could potentially benefit substantially from higher trade provided trade and transport
barriers are removed and transaction costs are minimized.

Bangladesh has succeeded in improving logistics by modernizing customs clearance procedures,

especially for exports and temporary imports. However, the country has failed to improve the
performance of its transportation system as rapidly as its neighbors. The cargo-handling
technology and method of operation of the Port of Chittagong remain mired in the 1970s.

Transport of containers by rail is underdeveloped because of lack of commercial management at

Bangladesh Railways. Inland customs facilities and storage are limited and the available
facilities are not located in a way that will minimize overall delivery costs. Slow and uncertain
vessel turnaround and container dwell times prevent producers from developing efficient supply
chains from the factory to the buyers’ warehouse or introducing just-in-time production.

Conclusion:
This presentation concludes that liberalization of non-policy barriers will spur Bangladesh's
trade, particularly in time of ongoing global economic and financial crisis. Improvement in
infrastructure that leads to reduce trade transportation costs should be a necessary step in order to
unleash Bangladesh's trade potential.
Recommendation:
One of the major findings of this presentation is that a large part of Bangladesh's potential trade
has remained unrealized. The estimated results indicate Bangladesh tends to trade more with
larger economies in general and for import developing economies in particular. The rising trade
transaction cost is one of the major trading barriers causing high unrealization of trade potential
in Bangladesh.